Invest in These Smaller Altcoins This FY24

During 4Q23, most crypto, particularly Bitcoin (BTC) and Ethereum (ETH), had bullish breakouts, confirming the optimistic outlook of their prices.  

However, BTC at $51,000 and ETH at $2,800 may be too much for some, especially for newbies. Buying these top two cryptocurrencies may not be easy because their promising growth prospects come at a high price. It is logical to think twice before purchasing these since many individuals and businesses are still recovering their finances. 

Given this, alternative coins or altcoins are taking the spotlight as traders flock to them. Their bullish pattern and increasing capitalization show enticing growth prospects. They may capitalize on the relative expensiveness of BTC and ETH to capture more traders. 

You may be looking for cheaper altcoins to buy and diversify. Yet, finding the right one can be tedious today. You must be more cautious if you have several options to buy, diversify, manage, and recommend. As such, you must keep a public crypto portfolio for your audience, especially if you juggle wallets and exchanges. 

This article will cover the best smaller altcoins to invest in today.

Why Invest in Smaller Altcoins

Ethereum is the leading altcoin and the second-largest cryptocurrency, valued at nearly $3,000. It has a market capitalization of $331B and a total circulating supply of $120.17M. Overall, the volume of ETH is now 21,208,559,616, giving it a wide gap from smaller altcoins. 

It continues to expand to other industries or niches, which allows it to offer various products and services, such as ETH contracts, DAOs, and credit monitoring services. However, many investors still find its price high for their risk appetite and financial capacity. Aside from their much lower price, several aspects show why they can be optimal choices. 

To make it easier for you, we will limit the list to the five smaller altcoins, which we think you should consider adding to your watchlist. 

Altcoins are also influenced by inflation and interest rates

Cryptocurrency holders and traders have always focused on market sentiments as the sole driver of price changes. Yet, the past two years have highlighted the high correlation between inflation and crypto prices. 

It started to surface in 4Q21 when crypto prices were peaking. We saw their increase slow down as inflation accelerates. Their inverse relationship became more evident in 2022 as crypto prices crumbled when inflation exceeded 7% for the first time in years. 

Crypto prices dropped further and steeply crashed in 2Q22 as inflation ranged from 8% to 9%. When the inflation rate peaked at 9.1%, prices hit rock bottom. Even larger cryptocurrencies like BTC and ETH did not avert this challenging situation. 

In the second half of 2022, prices started to move sideways, although they were still geared downwards. We can attribute it to the offsetting impact of decelerating inflation and interest rate hikes. 

But in 2023, cryptocurrencies started to regain their footing and gradually rebounded. This coincided with the faster decrease in inflation and interest rate hike pauses. These proved the inverse correlation and the increasing predictability of cryptocurrency price changes. 

In 3Q23, crypto prices slowed and had pullbacks, which we can attribute to inflation. It regained momentum from 3% in June to 3.2% in July to 3.7% in August and September. But since October, prices have rebounded with a sustained uptrend. 

In the picture below, we can see how the smaller altcoins reacted to inflation. 

Binance (BNB) 

Image Source: Yahoo Finance 

Dogecoin (DOGE) 

Image Source: Yahoo Finance 

Cardano (ADA) 

Image Source: Yahoo Finance 

Litecoin (LTC)

Image Source: Yahoo Finance 

Tron (TRX) 

Image Source: Yahoo Finance

Inflation deceleration can drive altcoin price surges 

The images above show that smaller altcoins may not be an effective inflation hedge. Their inverse trend can be risky when prices are elevated. Even so, price outlooks are optimistic today as inflation continues to decelerate. 

The slight inflation uptick to 3.4% last December was attributable to the increased spending during the holiday season. Last month, it dropped to 3.1%, approaching the Fed’s 2% target. 

The decrease in inflation shows that consumption normalized after the holiday season. As consumption normalization continues, inflation deceleration may decrease in the following months. Even better, the Fed will fulfill its promise to make three interest rate cuts this FY. These two macroeconomic indicators have a substantial influence on crypto price swings. 

To prove their relationship, we can use the regression analysis. 

Image Source: MS Excel, Data Ran By The Author 

The details above show the price changes of BNB in response to inflation. The Multiple R of 0.72 shows a high inverse correlation of 72%. Even better, there is low standard error, showing high consistency and manageable data dispersion. 

Lastly, the X Variable P-value is lower than 0.05, showing that it is significant. 

Let’s apply it to ETH for better precision. 

Image Source: MS Excel, Data Ran By The Author 

The results are affirmative to BNB’s observation. The Multiple R of 0.689 shows a high correlation of 69%. It also has a manageable standard error of 18.73. Lastly, the P-value is also lower than 0.05. 

Given all these, there may be upward pressure on altcoin prices. The heating crypto market will fuel these investor confidence rebounds. 

Impeccable returns 

BTC and ETH are showing enticing upside potential. Yet, the latter has recently underperformed relative to smaller altcoins. The Sharpe Ratio shows how their returns have outweighed their standard deviation over the years.  

The smaller altcoins have been much more volatile than ETH. Despite their high average annual returns, they outperformed the altcoin giant. BNB has been the best performer, with over 3,000% cumulative returns and almost 100% average annual returns.

This shows that the smaller altcoins are competitive enough to be invested in. Their high annual returns can continue this FY as the market environment becomes more stable. 

More interestingly, DOGE appears to be the optimal choice. It has the highest Sharpe Ratio of 0.71, which shows that this smaller altcoin has the best risk-reward management. 

With their cheaper price and competitive returns, investors can concentrate on these altcoins. 

Altcoins To Invest In 

These are the top altcoins to invest in this year. 

Dogecoin (DOGE-USD) 

Current Value: $0.08310

Market Capitalization: $11.89B

Average Annual Returns Since 2017: 84.04% 

Standard Deviation: 112.02%

Dogecoin (DOGE-USD) is an altcoin that started as a meme in 2013.  This makes it the original meme token in the cryptocurrency market. Thanks to its community, which has dedicated itself to creating insightful memes over the years, it’s no surprise DOGE has evolved into one of the most popular altcoins today. 

Even so, critics are still keen on its risks relative to BTC despite having big backers. Its price swings have been notable, ranging from extreme troughs to extreme crests and vice versa. The persistent apprehension is still understandable since this altcoin must prove its use in real-world scenarios. 

On a lighter note, its moderately strong correlation with inflation may substantially impact its price rebound. As inflation continues to decelerate, DOGE may rebound. The regression analysis below shows the inverse relationship between DOGE and inflation. The correlation of 54%, low standard error of 0.07, and a significant P-value of 0.00001 can be additional proof. 

Binance (BNB-USD) 

Current Value: $334.10

Market Capitalization: $49.96B

Average Annual Returns: 99.81% 

Standard Deviation 174.35%

Binance (BNB-USD) is famous for being a utility token used in paying trading transactions and getting discounted trades on Binance Exchange. What sets it apart from many other altcoins and other crypto exchanges is that Binance tokens can be used outside the trading platform. 

Binance is among the best-performing altcoins, given its average annual returns of 99.81%. This makes its standard deviation acceptable, especially since it now shows a bullish pattern. 

Even better, Binance is a highly resilient coin, having been through crashes and controversies. First, it has faced doubts after the FTX fallout in 2022. This exacerbated the impact of inflationary headwinds. 

In 4Q23, it faced another issue after its former CEO admitted his guilt of violating the US Anti-Money Laundering Act. This impacted BNB’s credibility, given the 8% drop in value a few hours after the report. 

Even so, BNB quickly went back on track after proving its capacity to sustain itself even after deducting the amount of fine it had to pay. Currently, it has nearly $87B in digital assets to pay the $4B in the wink of an eye. BNB is indeed highly liquid, which allows it to diversify its token reserves. 

Even better, BTC comprises 31% of the total token reserves. BNB does not heavily rely on BNB tokens, which are only equivalent to 4% of the total token reserves. Hence, BNB will not be another FTX in the making. 

Additionally, its 72% correlation should give it upside potential as inflation continues to decelerate. 

TRON (TRX-USD) 

Current Value: $0.129095

Market Capitalization: $11.34B

Average Annual Returns: 54.20% 

Standard Deviation: 102.00%

Tron (TRX-USD) started circulating in Singapore in 2017. Originally intended as a decentralized blockchain, TRX has expanded to other regions, helping it compete with larger altcoins. Now, it is already part of a DAO or a decentralized autonomous organization. 

Today, TRX is valued at $0.1210, about 48 times the value of its launch price of $0.0025. More interestingly, it has shown a sharp increase in the past year. It rose by 57% from $0.08 in mid-2023 to the current price. 

From February 2023 to the current price, the difference is 84%, which is much higher than the average annual returns of 54%. With that, we can see that the increase rate of TRX has accelerated in the past year. 

Moreover, the total value of its circulating supply is $88.07, equivalent to a market capitalization of $11.34B. As such, TRX is now one of the fastest-rising altcoins in the world. 

Given the current market environment, the TRX price rally may be sustained. We can verify it in its moderately strong correlation with inflation. The regression analysis below shows a correlation of 53%, a low standard error of 0.027, and a P-value lower than the maximum of 0.05. 

Image Source: MS Excel, Data Ran By The Author 

Litecoin (LTC-USD) 

Current Value: $70.14 

Market Capitalization: $5.2B 

Average Annual Returns: 4.3%

Standard Deviation: 98.02

Litecoin (LTC-USD) is one of the first altcoins to circulate in the market. It was initially designed to meet Bitcoin’s perceived shortcomings, such as mining monopolies and slow transaction processes. While BTC has become more of a store of value tokens, LTC is built for everyday transactions. 

Right now, LTC is capped at 84 million coins, making mining not as challenging as BTC and ETH. It is still stable today with a 74.2M circulating supply and a market cap of $5.2B. 

Right now, it is valued at $70.14. LTC is an underperformer today, given its average annual returns of only 4.3%. Also, its price has yet to recover. But its underperformance can be an opportunity to buy it at a discount. It may start to bounce back this FY as the market continues to heat up. The improving macroeconomic indicators may support it. 

Cardano (ADA-USD) 

Current Value: $0.5787 

Market Capitalization: $20.51B 

Average Annual Returns: 4.92% 

Standard Deviation: 117/24%

Cardano (ADA-USD) was one of the early adopters of the proof-of-stake consensus mechanism. This lowers transaction time by removing the problem-solving dimension of other coins like BTC. With this aspect, ADA can promise low fees while ensuring high security like other cryptocurrencies. Right now, ADA has yet to deliver. 

Currently, a single Cardano is valued at $0.5787, 44% higher than its value on the same day in 2023. It is also a 114% increase from its 3Q23 dip to $0.27. 

As such, ADA is a competitive altcoin that has the potential to sustain its price rally this FY. Given its responsiveness to these macroeconomic indicators, this can be supported by the decreasing inflation and interest rate cuts, 

Key Takeaways 

The cryptocurrency market is heating up with rosy growth prospects as market sentiments show favorable views. This is supported by the improving macroeconomic indicators, which can help increase investor confidence. 

Given their size, market capitalization, coverage, and value, Bitcoin and Ethereum are still at the top of the list. However, there are excellent and cheaper altcoins that may promise high returns that can outweigh the risk of volatility.